A successful content development and publishing industry requires a highly competitive intermediate value-adding chain to the consumer (Figure 18). The most beneficial outcome would be to secure the greatest possible returns to the content creator, with the lowest possible cost to the consumer.
This model underscores three basic points. The success of content developers requires the lowest possible intermediate cost for a given quality or grade of service. Secondly, the ideal industry model would recognise that consumers often use content to become content creators themselves. Thirdly, this suggests the desirability for Australia's intermediate players - distributors and carriers - to be the world's low cost and high value producers. The reality, however, is that Australia's content industries are constrained by distribution system congestion and excessive cost in the value adding chain to consumers (Figure 19).
In Australia's content-oriented industries, publishing and distribution are dominated by a few firms - see Figure 20 - leading to low overall monetary returns to creative effort and the holders of intellectual property. Content creators essentially work for wages - often very low - in the music and film business, and as a part-time activity when authoring books. Even in telecommunications-based services, like audiotex, the controller of the distribution channel, the telco, often takes more than 50% of call revenues, even though it has little or nothing to do with the production of the content.
Figure 20: Content industry distribution constraints
Segment Employment No. of Firms No. of Firms No. of Retail
in content producing/ wholesaling 75% Groups selling
development publishing 75% of total 75% of total
('000s) of local domestic domestic sales
output* shipments
Books 7.0 5 5 n.a. (<10)
Films, TV 60.7 76 10 5 FTA TV
3 Cinema chains
4 Video rental
chains
Music 67.7 5 4 10
Packaged 3.0 14 n.a. (<10) n.a
Software
(developed
in
Australia)
*IMM titles: <10 firms
Source: Cutler & Company Analysis, ABS, MIAC, ABPA, Encore Directory 1994
The implications to be drawn for Australian IMM industry development from this examination of distribution constraints are:
Other constraints need to be addressed at the same time
Assuming that the global distribution constraints can be significantly reduced, interactive multimedia content developers will need other potential problems to be addressed before their share of the revenue dollar can be significantly increased. These include:
A substantially larger interactive multimedia publishing industry in Australia will depend on policies aimed at the development of Australian talent. The present output of directors and audio-visual technical personnel is low, at only about 300 graduates per year. More like 3,000 are needed to form teams that can manage the scale of IMM projects suggested earlier.
Unlike live music and competitive sport, there is no obvious "food chain" for producing professional multimedia talent. It is essential that policy measures are put in place to produce quality (as in the Australian Institute of Sport), from a quantity base (as in music teaching in schools and junior leagues in football).
The multimedia industry can also seek to attract overseas talent to work in Australia, particularly while the output of locally trained people is low. This could yield a real benefit in scaling up local capability. The notion is to import experienced people to help train local talent and thereby import the investment in training made by other economies.
For the near term, confusion over copyright rules, and the cost of obtaining clearances to "repurpose" existing intellectual property, is adding a heavy layer of cost over multimedia production budgets, both in Australia and overseas.
There is both a constraint and a major opportunity here. For a local interactive multimedia industry to succeed, copyright and intellectual property administration laws and regulations must be the world's simplest and fairest, deal with convergence, and be the world's cheapest and quickest to process. There are some positive signs of progress here, but the key is to enact changes speedily, in order to give investors and publishers certainty about the Australian environment.
The Copyright Convergence Group has recommended a new right of transmission
to the public, which is a start to the process. The Group recommended that the new right should:
Nonetheless, much more needs to be done to facilitate rapid, low cost rights approvals and administration for the many digital fragments making up an interactive multimedia work. A prominent local IMM content developer and an intellectual property oriented legal firm have proposed a "Pro Active Rights Administration System" which has three main elements: a media project and element registration scheme, a process of issuance of Certificates of Title, and a Statutory Licensor. These proposals deserve immediate government attention.
From a legal perspective, according to the best thinking we have encountered on these matters, a "new media landscape" comes in view with IMM content, that must be addressed with a new approach to copyright law and administration. The suggested changes required would result in:
Many challenges are identifiable for electronic publishing from a legal perspective. These include: documentary title to authorial contributions; enforcing version control and author credits through the adaptation and production processes of a digital media work; introducing usage based licensing and rental rights for digital media works (this is key to on-line publishing); and helping moral rights adapt to the more complex world of digital expression. In this latter case, the requirements of IMM title development are clear: automated, low cost access to digital repositories of published material is required be it text, data, image or audiovisual in datatype. The overheads of asking permission to use a fragment of video or image or audio material, whether in or out of its original context, are going to be too high to be affordable within IMM budgets. The holder of moral rights will be, in essence, deciding to publish and give permission for anonymous re-use of their intellectual property when the material is placed within a digital repository.
The third issue that needs to be addressed is to have in place the mechanisms for an investment attraction program that is targeted to the needs of the major international publishers, record companies, film studios and software houses. We can fix the "food chain" and the copyright issues but still we need senior executive teams from the likes of News Corporation, Microsoft, Pearson Group, Electronic Arts and BMG Entertainment to be domiciled in Australia. They are needed to be here to direct investment in local creative teams, to have control of repatriated royalty streams, and to decide on reinvestment strategies for such revenues.
There is a clear role for government investment attraction policies in this area, requiring purposeful action at both the federal and state level. At the Commonwealth level, issues of the tax treatment of royalty income and the copyright laws need to be addressed, as does the utilisation of the 150% R&D tax incentive for the raising of syndicated financing for IMM content development.